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Legislature Passes Electricity Cost, Competition Bill

July 31, 2012

The Legislature today pressed its pro-business agenda sending to the Governor legislation that directly addresses competition among utility companies and the high costs of electricity which is a major obstacle for business growth in Massachusetts. The average electric rate in Massachusetts is 14.24 cents per kilowatt hour – the seventh highest in the United States and well above the national average of 10 cents.

“As chair of the Jobs Creation Commission, I’ve heard time and time again that the cost of energy in the Commonwealth hampers the ability for business to grow and create more jobs,” said Spilka. “I am pleased that the Legislature took action by passing this bill, which will provide relief to residents and businesses while promoting continued investment and growth in our renewable energy sector.”

“We have streamlined our economic development model, lowered corporate tax rates, and provided tools for businesses to negotiate affordable health insurance, but the high cost of electricity continues to be a burden,” Senate President Therese Murray (D-Plymouth) said. “Part of the reason is our region’s relative lack of domestic fuel sources such as gas and coal for electricity. But, even as we build our clean energy sector, high costs are also driven by the industry itself – a combination of aging transmission and distribution infrastructure, and a lack of accountability from investor-owned utility companies. This legislation will improve the reliability of our grid and address some of the cost-drivers for electricity without compromising our commitment to developing renewable energy resources.”

The bill addresses the high cost of electricity in Massachusetts in an effort to support job creation and economic recovery. It seeks to reduce the price of electricity by identifying cost-drivers, reviewing rates on a more regular basis, and demanding more competition.

To establish competition in the market, the bill ends the current long-term contract program under the Green Communities Act by December 2012 and requires investor-owned utilities to competitively bid proposals from renewable energy suppliers for long-term renewable energy contracts. And by increasing the overall net metering cap from 3 percent to 6 percent, the legislation doubles the existing limits on municipal and privately-owned projects that generate their own renewable energy. Anaerobic digestion projects will now be eligible for net metering credits, an important addition to the program for Commonwealth farmers.

The legislation requires electric companies to file rate cases every five years with DPU; increases from six to 10 months the time DPU has to review rate cases; prevents DPU from approving electric rate case settlements more than once every six years; requires DPU to design base rates in such a way that equalizes their application across rate classes; and directs DPU to open a docket to examine reconciliation factors employed by utility companies.

The bill also requires the Department of Energy Resources (DOER), when it intervenes on cases before the Department of Public Utilities (DPU), to do so on behalf of all commercial and industrial ratepayers.

The legislation also does the following:

Expands DPU’s oversight to transactions involving a regulated company, not just Massachusetts-regulated companies;

Allows hydroelectric power to count toward a utility’s renewable portfolio standard requirements and the Commonwealth’s renewable and alternative energy generation goals under the Green Communities Act;

Establishes a voluntary energy efficiency pilot program for the five largest electric and five largest gas users in each utility’s service territory; and

Establishes a task force, led by the Secretary of EOEEA, to offer solutions for communities hosting decommissioning coal plants, including answers on how to deconstruct, remediate and revitalize such plants. Provides for a process by which the DPU will ascertain whether the impending retirement of the Salem Harbor Power Station will leave a gap in electricity generation within the NEMA load zone. If a need is found, the DPU may direct utility companies serving that zone to solicit proposals from generators to fill the need.

Because of the state’s ongoing commitment to renewable resources, Massachusetts has the second-lowest greenhouse gas emissions of any region in the nation; has positioned itself as a frontrunner in the clean energy economy, which currently employs 64,000 people statewide; and has become one of the top states for innovation, investment, employment and policy.

The legislation is careful to maintain this position without harming the many successful businesses for which electricity is a detrimental cost of doing business.